Falling Energy Prices Spark Hopes for Fed Rate Cuts

US inflation came in below expectations in a boost for investors hoping that the US Federal Reserve might be able to start cutting interest rates in a matter of months. Figures from the Bureau of Labor Statistics showed that prices did not increase in the month for the first time since last June. Economists had expected to see a 0.1 percent increase. This meant the annual rate of inflation eased to 3.3 percent, slightly below the 3.4 percent expected by markets.

Markets think interest rates will be left on hold for the seventh consecutive meeting, but the more important question is how the Fed’s so-called ‘dot-plot’ projections have changed. These forecasts show how policymakers expect economic conditions to develop and will give investors some clues about when rate-setters might be willing to cut interest rates. Throughout much of this year, inflation has come in ahead of expectations forcing markets to reassess when the rate-cutting cycle will begin.

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